Wages ‘should’ rise, but why and how?

Ged Nash recently said that ‘wages should rise‘ as a way to give some relief to hard pressed middle income earners. This is an unusual stance given that Mr. Nash is a financially unaffected third party to this and has no idea of the situation many companies are in which more about a state of tight cashflow management and deleveraging.

Why should wages rise? With unemployment still elevated at well over 11% there is still enough excess capacity in the labour market to ensure wages don’t rise except for in industries with a constrained supply of workers or a skills gap, such as IT is experiencing at present.

Other than that, wages are unlikely to naturally rise because you can replace a worker for today’s market clearing prices (current wage), although that doesn’t always happen as people are not widgets, but the general thesis holds. If placed between two propositions of workers with similar skills you can opt to take on an extra person on a ten person …

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